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Study: Bad Economy Spells Good News For Entrepreneurs

Written by Ken Gaebler
Published: 6/23/2009

A study by the Kauffman Foundation found that recessions and bear markets may actually be good news for entrepreneurs.

Following many months of depressing economic news for small businesses, a silver lining has emerged.

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A recent study by the Ewing Marion Kauffman Foundation found that entrepreneurial capitalism could be at its most successful during recessions and tough economic times.

The Kauffman Foundation discovered that 57 percent of the companies on the 2009 Fortune 500 list, and 48 percent of the 2008 Inc. list, began during a recession or a bear market. It also found that the number of startup companies actually increased during the 2001 recession.

The study, titled The Economic Future Just Happened, suggested that recessions and bear markets cause little long-term damage to startup companies, both in their formation and survival.

In addition, job creation from startups is more stable and resistant to downturns than general job creation in the same economy, the study concluded.

"History supports that new firms emerge during times of economic turbulence, when unemployment is high and the entrepreneurially-minded seize the opportunity to start companies," said Christian Conroy, state director of the Pennsylvania Small Business Development Centers.

The study also suggests that what is good news for entrepreneurs may be good news for the nation - these new startups may play an important role in helping the economy out of the recession.

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